The net-zero materials transition: Implications for global supply chains (2024)

Increasingly bold climate targets are changing global materials supply chains, to the extent that the transition to a net-zero emissions economy has sparked a “materials transition.” This report aims to provide an integrated perspective on these supply-chain changes, including materials demand, shortages that can be expected, and key actions that will be required to balance the equation and safeguard the speed of the transition.

With these points in mind, our research explores the following key findings:

Materials are a critical enabler of the net-zero transition. The world has embarked on an ambitious decarbonization journey toward a net-zero emissions economy, which will require fundamental technology shifts across industries at an unprecedented speed. These technologies often require more physical materials for the same output when compared with their conventional counterparts during the construction phase. For example, battery electric vehicles (BEVs) are typically 15 to 20 percent heavier than comparable internal-combustion engine (ICE) vehicles and will therefore become a key driver for materials demand in the coming decades. Consequently, the extent to which global materials supply chains can keep up with new and accelerating sources of demand will be a critical determinant of global decarbonization rates.

Even with the current decarbonization trajectory trending toward 2.4° Celsius, the supply of many minerals and metals embedded in key lower-carbon technologies will face a shortage by 2030. While some materials such as nickel may experience modest shortages (approximately 10 to 20 percent), others such as dysprosium, which is magnetic material used in most electric motors, could see shortages of up to 70 percent of demand. Unless mitigation actions are put in place, such shortages would likely hinder the global speed of decarbonization because customers would be unable to shift to lower-carbon alternatives. Moreover, these shortages would lead to price spikes and volatility across materials, which in turn would make the technologies in which they are embedded more expensive and further slow adoption rates.

We will continue to see a high concentration of mineral and metals supplies in a handful of countries, including for example China (rare-earth elements), the Democratic Republic of the Congo (cobalt), and Indonesia (nickel). Combined with a regulatory landscape that is increasingly focused on regionalization—as seen through the US Inflation Reduction Act and the EU Green Deal Industrial Plan, for example—these concentrated supplies could affect regional access to materials within the scope of certain agreement areas, even when the global market is balanced. At the same time, such concentration could also offer opportunities to traditional mining countries to develop refining activities domestically.

Harmonized actions on supply, demand, innovation, and policy will be required to balance the equation and safeguard the speed of the transition.

• Supply. It is crucial to ensure the timely scale-up of projects that have already been announced, which will require mining to accelerate beyond historical growth rates for many materials while simultaneously doubling down on exploration to ensure further scale-up of supply beyond 2030. Investments in mining, refining, and smelting will need to increase to approximately $3 trillion to $4 trillion by 2030 (about $300 billion to $400 billion per year).1This represents a 50 percent increase compared to the previous decade, in a context where mining investments have been declining in the recent past (approximately $260 billion in 2012 to approximately $150 billion in 2019, a decline of about 40 percent). Moreover, capital will need to be redirected toward new materials, with stable investments in iron ore but twice the investments in copper and an eightfold increase in investments in lithium expected. Labor capacity will need to be increased by 300,000 to 600,000 specialized mining professionals, and an additional 200 to 500 gigawatts of (ideally low-carbon) energy will need to come online by 2030 to power these assets, equivalent to 5 to 10 percent of estimated solar and wind power capacity by 2030. Finally, the scale-up will require smooth permitting processes, timely infrastructure deployment, equipment availability, and adequate water resources.
• Demand. Downstream industries will need to shift demand patterns toward proven technologies that are less materials-intensive or that require different materials for which supply is less constrained.
• Innovation. Investments in materials innovation and breakthrough technologies should be amplified. On the demand side, this might involve exploring material substitution options for long-term-constrained or regionally concentrated materials. On the supply side, investors could consider focusing on enhanced recycling practices for new materials such as rare-earth minerals, as well as innovative solutions to increase the throughput of existing assets.
• Policy. New policies may facilitate the scale-up of supply, such as by streamlining permitting procedures for new asset developments. Policies could also enable a demand shift toward alternative technologies by guaranteeing a level playing field across different technological options, for example, and safeguarding regional security of supply and industry competitiveness.

Stakeholders can increase the likelihood of success by developing strategies that offer optionality and resilience across a broad range of global responses to material shortages. As a first step toward mitigating risk and tapping into the vast opportunities presented by the materials transition, it will be critical for governments and companies alike to maintain or strengthen their understanding of the dynamics of the global materials supply chain and potential long-term scenarios. For governments, doing so could help shine a light on the security of supply and safeguard the long-term competitiveness of local industries. For companies, it can inform decisive actions that are more likely to position them as industry leaders in the years to come.

Conclusion

As the world accelerates the deployment of climate technologies in support of the net-zero transition, there is a risk that materials supply might not scale at the required speed. Our research has shown that energy and materials are strongly interconnected and that the world will also have to go through a materials transition to deliver on its net-zero ambitions.

While several uncertainties remain about how the materials transition will play out—such as the speed of decarbonization, development of trade policies, speed of innovation and time to market for breakthrough technologies, and permitting timelines for new projects, among others—governments and companies can plan strategic actions that are resilient across a broad range of outcomes.

As a first step toward mitigating risks and tapping into the vast opportunities presented by the materials transition, it is critical for governments and companies to maintain or strengthen their understanding of changing global materials supply chain dynamics with a long-term perspective. For governments, doing so could help shine a light on security of supply and safeguarding long-term competitiveness of local industries. And similar to the actions and results of frontrunners in the energy transition, companies can gain insight on decisive actions that are more likely to position them as industry leaders in the years to come.